RBI: Banks should share info to counter bad loans

Wednesday, 31 October 2012 02:20 administrator
The Reserve Bank of India has asked banks to share information on credit exposure, derivatives and unhedged forex currency exposures of borrowers among themselves. RBI said the banks should strictly adhere to the instructions regarding sharing of information relating to credit among themselves, and put in place an effective mechanism for information sharing by December 2012. The central bank warned that banks would face action, including penalties, if they did not adhere to the norms. This announcement comes at a time when the banking sector is seeing a surge in corporate debt restructuring and rising bad loans.

RBI pointed out that lack of sharing of sharing is one of the major reasons for deterioration in the asset quality of banks. Banks ignored the earlier directive despite specific instructions issued in September and December 2008 regarding sharing of information on credit exposure.

“Any sanction of fresh loans/ad hoc loans/renewal of loans to new/existing borrowers with effect from January 1, 2013 should be done only after obtaining/sharing necessary information,” said the central bank.